Signing loan contract

When in need of loan to finance personal, family or even business emergencies, remember to borrow solely from licensed moneylenders that provide legitimate loans. Doing so would mean being protected from the possibilities of being taken advantage of. Licensed moneylenders are required to follow the law specifically those rules that are set by the Ministry of Law.

Take for example, licensed money lenders could not set interest rate and late interest rate that are more than the cap set by the Ministry.

Moreover, borrowers are protected from possibilities of harassment when it comes to loan collection by moneylenders. The Ministry has specific guidelines on that matter which a licensed moneylender should religiously follow. Otherwise, it can mean revocation of license by the Registry of Moneylenders, payment of fees and other sanctions.

On the contrary, borrowing from unlicensed moneylenders could put you into more trouble than you are already in. Their loan operations from application process to debt collection are illegal. There is nothing that is stopping them from employing threat, violence and intimidation in any part of their operation.

In these trying times brought by the pandemic, many are tempted to resort to the shortcut, that is, getting loan from ah long instead from a licensed moneylender. Recent news show new ways which loan sharks employ to harass those that borrowed from them that remain unpaid. They had some food worth $800 delivered to the house of the borrower’s brother. The said brother, aged 49, was able to talk to the loan shark and the latter warned him that there will be more to come.

Remember that getting personal loans from ah long will affect not only you as the borrower but also your relatives. The trouble you will be putting your whole family in is just not worth it. The Ministry protects the rights reserved to every borrower which could not be secured when you borrow from unlicensed moneylenders.

What do you need the loan for?

Loans are for different reasons, purposes and priorities of borrowers. The common denominator among these all is the need. People loan money because they need it for personal purposes, for building or renovating a house, for funding a start-up business, and so on.

Whatever the reason for the loan, know that there are various types of loans in Singapore that are designed for specific purposes. Learning these will guide you in choosing which loan to apply for.

Personal Loan

Personal loans in Singapore are unsecured loans that are used for practically anything. They could be used to finance personal, family or business expenses. Personal loans could either be term loans or personal line of credit.

Term loan involves a specific period to repay the loan and a fixed monthly installment payments. The loan should be paid by the end of that said period.

Personal line of credit is also called a revolving loan because you are given a credit limit which you could repeatedly use provided that you have paid whatever you have used previously.

Foreigner Loan

This type of loan is offered to foreigners who have a valid work permit or employment pass in Singapore by licensed moneylenders in the country. Certain minimum requirements must be fulfilled and provided such as proof of income, proof of residence, must be at least 21 years old and working full time.

Payday Loan

Payday loan involves a small loan amount which is usually your one month’s worth of salary with a high interest rate. Such must be paid back within 30 days or at your next paycheck. Some of the benefits of this personal loan in Singapore are fast approval, fixed interest rate and easy to qualify for.

Business Loan

Singapore business loans are offered to businesses of whatever kind and nature by either banks or licensed moneylenders. However, compared to banks, licensed moneylenders approve this loan faster. Some of the advantages of business loans include having various loan payment options, accessible and convenient.

Bridging Loan

Bridging loan is a short term loan of up to six (6) months. This type of loan applies to the purchase of all types of property.

Business loan, as its name suggests, is to bridge the time between the sale of an old property, usually a house, and the purchase of a new one. It funds the down payment of the new property while the payment for the sale of the old property is still pending.

Once the sale proceeds are received, the borrower is ought to make full payment of the business loan.

Borrowing from banks vs. moneylenders

Banks are very strict with requirements. Their standards are very high. They usually require a guarantee, surety or mortgage for the loan. Banks make sure that borrowers are not only qualified but also able to repay the loan after some period of time.

On the contrary, licensed moneylenders in Singapore are less strict in the sense that loan application requirements are not as many as those that banks necessitate. Hence, approval of the loan is faster and more possible.

Comparison Table

 Licensed MoneylendersBanks
Loanable AmountUpto 6x of monthly salary
depending on income
2-6x monthly salary up to S$200,000
Interest Rates4% 3-5%
Payment TermsRepayment schedule varies: weekly, bi-weekly, payday, or monthly.Long-term repayment plans: usually extending beyond one year

1. Loanable amount

In terms of loanable amount, a licensed moneylender takes into consideration annual income, citizenship and place of residence. A bank also considers these factors but with much higher standards. 

Licensed moneylenders offer personal loans to Singaporean citizens and permanent residents (PRs) with annual income of less than S$10,000, on the one hand, and more than S$10,000 but less than S$20,000, on the other hand, a loanable amount of up to S$3,000. Foreigners and PRs can loan a maximum amount of S$500 and S$3,000, respectively. Those who earn an annual income of over S$20,000 can loan as much as more than 6 times their monthly income without regard to citizenship.

Banks do not extend personal loans to those that earn less than S$20,000 a year. Banks only extend personal loans to a Singaporean or a PR who earn an annual income of more than S$20,000 and to a foreigner who earn an income of more than S$45,000.

So if you earn an income less than S20,000, do not expect loan approval from a bank. You can try your luck, however, from a licensed money lender.

2. Interest rate and other charges

There is a huge difference when it comes to interest rates between banks and licensed moneylenders. Although the Ministry has set a cap on interest rates which licensed moneylenders may charge, such interest rates are still comparably higher than those of banks. One reason for this is because unlike banks, licensed moneylenders can approve loan applications in a matter of minutes.

The convenience of fast approval does not come without a price. A whopping 25% to 30% annual interest rate may be charged by moneylenders. The monthly interest rate of 4% would be costly in a matter of a few months.

For this reason, you may want to consider borrowing only from a licensed moneylender as a last resort.

3. Payment Terms

Moneylenders desire that you pay each of your installments by the due date. It can be weekly, bi-weekly, payday, or monthly, depending on your agreement in the contract. This way, you prevent the accrual of your interest charges as well as the prevention of late interest rate.

Banks, on the other hand, issue the term loans that have long-term repayment plans that can extend beyond a year. Such repayment plans could be years, however, the loan would need collaterals. 

4. Eligibility and requirements

To qualify for personal loan Singapore from moneylenders:

  • You must be at least 18 years old
  • For Singaporean/ PR, you must either have a regular employment or a source of income above S$1,500 every month. Prepare your identity card/ NRIC, proof of residence (if you’re not the owner of the residence), tenancy agreement (if you’re renting a flat), last 3 months payslips, employment letter and SingPass.
  • For expats/ foreigners working in Singapore, you must either have a regular employment or a source of income above S$2,000 every month. Prepare your valid work permit, passport, proof of employment, last 3 months payslips, employment letter, proof of residence, latest bank statement of account and SingPass.

To qualify for personal loans Singapore from banks:

  • You must be 21-65 years old
  • For Singaporean/ PR, your annual income must be S$20,000 and above
  • For Foreigners, your annual income must be S$40,000 and above. Present your employment pass with at least 12 months validity.

How to apply

  1. Apply from the comfort of your homes. Go directly to the website of the chosen licensed moneylender and download the form.
  2. Visit the office or branch for in-person consultation. The licensed moneylender will give you the opportunity to customize your legal loan plan.
  3. Wait for your loan to reflect on your bank account. Licensed moneylenders allow you to receive the loan as soon as the loan contract is signed.

Friendly Loan Officer

Closing

No one has been spared by this pandemic from a financial crisis. Everyone is trying his or her best to make both ends meet. When you’re tempted to resort to the shortcut that is the loan sharks, think twice because you’re surely putting yourself to more trouble than you are already in.

Make the smart choice of funding your money constraints through the help of licensed moneylenders. Know that you are never out of legal options because legal moneylenders are always there. Raffles Credit Pte Ltd is a licensed money lender under the supervision of the Registry of Moneylenders that offers different types of personal loans.

During these trying times, your choice of moneylenders in Singapore would make a big difference. It has to be like Raffles Credit whose expertise in the field of moneylending has been tried and tested for a decade now. It has helped many to get through their financial problems because it not only provides financial knowledge but also thoughtful service and kind attention to their plight.